Bonus

AAA

DEFINITION of 'Bonus'

1. Additional compensation given to an employee above his/her normal wage. A bonus can be used as a reward for achieving specific goals set by the company, or for dedication to the company.

2. Dividends paid to shareholders from funds created out of additional profits realized by the company.

3. A premium paid for accepting an agreement. Sometimes referred to as a "signing bonus".

4. Anything over and above what is expected.

INVESTOPEDIA EXPLAINS 'Bonus'

1. Bonuses can add up to the majority of some employees' compensation. For example, Goldman Sachs CEO L. Blankfein received $68 million in cash and stock as a 2007 bonus, but only made $600,000 in salary. Due to these high amounts, corporate compensation is public information in public companies.

2. These bonus dividends are paid to specific shareholders. The board of directors would approve payment, and can also decide to stop dividends at its discretion.

3. Signing bonuses are used as an incentive to obtain employees or contracts. The initial payment is designed to entice the signing of an agreement that will cost the company more now for higher future benefits.

4. A realized benefit that was not intended or planned.

RELATED TERMS
  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Performance Bonus

    A form of additional compensation paid to an employee or department ...
  3. Pay Czar Clause

    A buzz word describing a clause found in financial institutions' ...
  4. Golden Parachute

    Substantial benefits given to a top executive (or top executives) ...
  5. Stock Compensation

    A way corporations use stock options to reward employees. Stock ...
  6. Year-End Bonus

    A reward paid to an employee at the end of the year. Many year-end ...
Related Articles
  1. Investing Basics

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  2. Professionals

    How To Make $1 Million In Finance

    The best opportunities to maximize sheer earning power are in investment banking, private equity and hedge funds. Find out what it takes to succeed in these ultra-lucrative areas of finance. ...
  3. Investing Basics

    Dividend Facts You May Not Know

    Discover the issues that complicate these payouts for investors.
  4. Personal Finance

    Common IRA Rollover Mistakes

    Avoid paying excess taxes by learning some simple transfer rules.
  5. Professionals

    6 Employment Perks And How To Get Them

    Find out how to get more than money from your employer.
  6. Options & Futures

    A Guide To CEO Compensation

    Make sure you assess whether a CEO has a stake in doing a good job for you, the shareholder.
  7. Options & Futures

    A Close-Up On Gross Ups

    Learn about this hidden perk and why it's often bad news for investors.
  8. Economics

    What Is The Labor Market Conundrum?

    We are facing a conundrum with investment implications: Why are wages still stagnant, when jobs are being created at the fastest pace since the late 90's?
  9. Stock Analysis

    How Boeing is More Than Just a Coach-Class Seat

    The number of market leaders that indisputably dominated their industry in 1916 and still do today is almost nonexistent — except for Boeing.
  10. Investing

    What Tech Companies Seeking Funding Must Overcome

    Tech companies face a unique set of challenges, including a need for timely responses to changes in technology and difficulty recruiting the right talent.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center